Cost-cutting adds strength to Eldorado

Rigorous cost-cutting enabled Eldorado Gold (ELD-T) to triumph over production shortfalls in the recent fourth.

During the 3-month period ended Dec. 31, 1998, Eldorado produced 39,932 oz. gold, compared with 46,073 oz. in the corresponding period of 1997.

The shortfall is attributed to the closure of the La Trinidad mine in western Mexico and to the unscheduled shutdown of one of its autoclaves at the Sao Bento mine in eastern Brazil.

Total cash costs during the quarter were US$254 per oz., compared with $US294 in the year-ago period.

The company’s strong hedging position provided an average gold price of US$350 per oz. during the period, resulting in a contribution margin (the difference between revenue and total cash cost) of US$100 per oz., or US$4 million.

At Sao Bento, cash operating costs declined to US$227 per oz., compared with US$266 per oz. in the final three months of 1997. For all of 1998, cash operating costs dropped to US$250 per oz., compared with US$288 in 1997.

The mine produced 10,646 oz. gold in the fourth quarter at a cash cost of US$213 per oz.

Eldorado expects the mine to produce 125,000 oz. in 1999 at US$200 per oz., which represents a 19% decrease in cash costs over last year. The projected decrease is due to the sharp devaluation of the Brazilian currency. The company calculates that if the real stabilizes at a price of $1.60 per U.S. dollar, its cash costs will drop by US$27 to US$200 per oz., when compared with costs incurred in the recent quarter.

The gold resource at San Bento was last pegged at 5.2 million tonnes averaging 10.93 grams per tonne, or 1.8 million contained ounces.

Meanwhile, at the Colorada mine in northwestern Mexico, cash operating costs dropped to US$273 per oz., compared with US$297 in the fourth quarter of 1997. Cash operating costs for all of 1998 were US$246 per oz., compared with US$294 in 1997. This year, the mine is expected to produce 60,000 oz. gold at US$245 per oz.

The shutdown at La Trinidad was due to depletion of reserves and heavy rainfall. Decommissioning and reclamation are under way.

Farther afield, in Turkey, Eldorado is developing its wholly owned 1.2-million-oz. WT/Efemcukuru gold deposit. The mining plan calls for underground mining and a processing facility equipped with a flotation and gravity circuit. The resource is pegged at 2.8 million tonnes averaging 14.06 grams gold per tonne.

Nearby, at the Kisladag project, Eldorado has completed a 6-hole, 1,600-metre drill program. All six core holes showed pervasive gold mineralization which starts at surface. The mineralization was outlined within a 600-by-600 metre area that has a coincident geochemical anomaly covering a 1-km-by-600 metre area. The target remains open to the west, east and at depth.

Highlights from the program are as follows:

• Hole 33 intersected 139.8 metres averaging 1.72 grams gold starting at a down-hole depth of 2.8 metres.
• Hole 34 cut 154.5 metres grading 1.2 grams gold starting 2 metres down-hole. Included in this intercept was a 57.5-metre interval grading 1.6 grams gold starting at a down-hole depth of 99 metres.
• Hole 35 intersected 250.4 metres averaging 1.77 grams gold, starting at a down-hole depth of 3.3 metres. Included in this intersection was a 122-metre interval assaying 2.53 grams gold.
• Hole 36 hit 158.4 metres of 1.16 grams gold starting at 5.4 metres down-hole.
• Hole 37 cut 135.6 metres of 1.09 grams gold, starting at a down-hole depth of 2.2 metres. Included in this intercept was a 47.2-metre interval of 1.86 grams gold.
• Hole 38 intersected 115.7 metres averaging 1.19 grams gold starting at a down-hole depth of 39.8 metres. Included in this intercept was a 27.7-metre interval of 1.34 grams gold.

Mineralization at Kisladag is associated with strong quartz-alunite-pyrite-tourmaline alteration of andesitic volcanic flows and pyroclastics within a caldera complex. Oxidation and partial oxidation extend to depths ranging from 40 to 100 metres. The alteration is overprinted by several phases of quartz and quartz-sulphide stockwork, as well as breccia. Eldorado believes that the results of the first-phase drill program indicate the presence of a bulk-tonnage gold zone. Further exploration will focus on delineating the higher-grade core (greater than 1.5 grams gold per tonne), in addition to stepout drilling.

The company says it expects to produce a total of 185,000 oz. gold from all its operations in 1999. The projected average cash cost is US$215 per oz.